KLR Group reiterated a Buy rating on SM Energy (NYSE: SM), and raised the price target to $59.00 (from $53.00), as the company places more concentration in the Midland Basin. SM is acquiring ~35,700 net acres in Howard/Martin Counties in the Midland Basin ~$1.6 billion, comprising ~$1.1 billion in cash and 13.4 million common equity shares valued at ~$500 million.

Analyst John Gerdes commented, "We are increasing our target price $6 to $59 per share following greater development concentration in the Midland Basin and full value for the Williston Basin divestiture. The company’s mid-cycle capital yield is ~120% versus the industry median cash recycle ratio of ~125%. Prior to the recent Howard County acquisitions, SM’s capital yield was slightly less than 100%."

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